Industrial companies have long been called digital laggards. But the truth is starker: many are sleepwalking into irrelevance. While AI reshapes industries, too many traditional players remain stuck in the past—bound by legacy systems, paralyzed by complexity, and allergic to risk.  

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Today, digital, AI, and automation are reshaping industries. During the first quarter of 2024, half of S&P 500 earnings calls mentioned AI, reflecting its transformation of every industry, including biotech, entertainment, and industrials. Among top-performing industrial companies, about half cite digitization as a core strategy (Exhibit 1), and its importance shows up in the leadership ranks. Sixty-five percent of Fortune 500 firms now have chief digital officers (CDOs) or chief information officers (CIOs), and half of US industrial firms have dedicated digital strategy leaders. Still, scaling digital can overwhelm with its complexity: 70% of data is trapped in legacy systems, asset-heavy operations require integration of AI and the Internet of Things (IoT), operations are housed at multiple sites, and products often require product customization. Even so, some industrial companies have taken steps ahead of tech players. John Deere’s autonomous tractors and Caterpillar’s condition monitoring demonstrate how machine learning and AI can power asset-heavy operations. Rockwell Automation’s AI-enabled Logix platform has helped it become the largest pure-play automation company in the world. Rockwell, Caterpillar, and Grainger are using digital to drive growth and redefine customer experience. Their success points to a broader truth: the gap between hype and reality is shrinking—and industrials that act now can turn digital transformation into a competitive advantage.

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Grainger went all-in on digital before it was cool—and it’s paying off. Since its founding in 1927, Grainger has emerged from the “stodgy” industrial world to become a digital powerhouse (Exhibit 2). The company started its digital evolution early, stays ahead of tech disruptions, and delivers robust outcomes. Today it is the largest MRO distributor in North America, with more than 4.5 million active customers, 26,000 employees, and 34 distribution centers handling more than 30 million products. Grainger is North America’s 11th-largest e-commerce company, with about 15 million registered online users and 75% of its revenue coming from its digital channels. Some industrial CEOs still believe that digital is optional, but Grainger and other leading companies know it’s the oxygen companies need to grow and thrive.

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Grainger’s Bold Moves

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To serve its business customers, Grainger deploys technology, an omnichannel approach to distribution, and data-driven precision. The company has pursued digital initiatives involving six key elements:

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1. Strong e-commerce infrastructure. Grainger launched e-commerce early, with its website going live in 1996. The company integrated data that helps customers make better decisions—going beyond general descriptions to provide specific proprietary product descriptions and other important data.  

2. Self-service and digital tools. To encourage self-service, Grainger built mobile apps, AI chatbots, and smart search. Automated approvals and spending limits have streamlined the ordering process.  

3. AI-based products. Grainger uses AI to recommend products based on purchase history and industry needs. The AI provides real-time data synchronization to make sure product data is always accurate.

4. A seamless digital experience. Customer relationship management (CRM) synchronizes data in real time, so an in-person sales rep and the online platform will both have the same information available at the same time. In addition, AI chat boosts customers’ engagement with real-time support.  

5. Digital marketing and SEO mastery. Paid search and retargeting expand the company’s reach beyond Google. SEO and content marketing fuel organic traffic.

6. Strategic partnerships and acquisitions. Grainger formed a joint venture to secure ownership of MonotaRO in 2009. Grainger also acquired Zoro.com in 2011, making it a wholly owned subsidiary.

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Grainger’s digital focus, in combination with its commitment to customer experience, has contributed to exceptional value creation. From 2001 to 2024, Grainger’s stock price rose 28.9 times, versus 4.5 times for the S&P 500.

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Sitting on a Gold Mine? Learn to Dig

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The Grainger example shows the rich potential of digitizing, but if other industrials want their share of the digital gold, they will have to start digging. To learn how, companies can explore how they might pursue their own version of what Grainger has done well. Grainger’s approach offers some practices that may apply broadly: a tech-forward mindset, mastery of the omnichannel business model, and data-driven precision, all in service of redefining B2B to deliver a consumer-like purchase experience. It is significant that although Grainger was an early adopter of technologies, what really propelled large numbers of customers to engage through digital channels was the company’s objective to give customers the information they need to be successful in their jobs.

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For companies wanting to make the most of digitization, a smart approach starts with CEO commitment and dedicated roles in a team under a CDO or CIO. An early objective should be to build a strong data foundation for real-time data visibility across functions. Companies also should identify high-impact use cases and reimagine customer journey maps in order to develop a digital-first experience.

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The internet has brought unprecedented transparency to doing business in the industrial sector, and this presents an opportunity for industrial companies to differentiate themselves based on an understanding of what their end customers do and what they need to succeed. Grainger benefited from the intellectual curiosity of its leadership at a time when transformative new technology was emerging. Its example presents several lessons that other companies looking to digitize may benefit from. Practices to consider adapting include developing a tech-forward mindset, mastering an omnichannel business model, making data-driven decisions company-wide, and making e-commerce in the B2B sector as attractive to customers as it is to consumers served by B2C businesses.

Industrial digitization starts at the top, with CEO commitment and dedicated roles in a team under a CDO or CIO. Other measures that give a company an edge in today’s environment include establishing a strong data foundation for real-time data visibility across functions, identifying high-impact use cases, and reimagining customer journey maps in order to develop a digital-first experience.  

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An Industrial Digitization Road Map

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Industrial digitization starts at the top, with CEO commitment. In addition, industrial companies should establish strong data foundations and focus on creating a digital-first customer experience. Here are ideas for getting started:

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Start at the top  

The chief executive should be the key decision maker. The CEO should invest at least 10% of his or her time in digital initiatives.

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Establish a dedicated role  

One person, typically the chief digital officer or chief information officer, should own the digital agenda and have a full-time team for this work.  

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Build a data foundation  

The objective for industrial manufacturers embarking on a digital transformation should be real-time data visibility across functions. To unify legacy systems, companies can leverage data lakes and the cloud.  

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Prioritize high-impact use cases and pursue scalable and measurable solutions  

For each use case, there should be a clear business case and a goal for ROI.  

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Reimagine customer journeys as a digital-first experience  

Define a target for improvement in customer engagement—at least 20%.

Leading this type of transformation is becoming an essential skill at industrial companies. More and more companies that thought AI and digital were unaffordable are realizing that inaction in the face of technological change is what they truly cannot afford.

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The internet has brought unprecedented transparency to doing business in the industrial sector, and this presents an opportunity for industrial companies to differentiate themselves based on an understanding of what their end customers do and what they need to succeed. Grainger benefited from the intellectual curiosity of its leadership at a time when transformative new technology was emerging. Its example presents several lessons that other companies looking to digitize may benefit from. Practices to consider adapting include developing a tech-forward mindset, mastering an omnichannel business model, making data-driven decisions company-wide, and making e-commerce in the B2B sector as attractive to customers as it is to consumers served by B2C businesses.

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The lesson is clear: digital is no longer optional, it's the path to relevance, resilience, and long-term growth.